Why Pakistan's Economic Woes Matter
The recent warning from the Governor of the State Bank of Pakistan, Jameel Ahmad, about the unsustainability of Pakistan's growth model for its population of 250 million has raised concerns globally, including in the North East region of India.
Shortening Business Cycles and Weakening Recoveries
According to a report by European Times, Pakistan's business cycles have been shortening, and each recovery has been weaker than the one before. This situation has led to a prolonged phase of stabilization that has adversely affected both households and businesses in the country.
Soaring Poverty, Unemployment, and Stagnation
The report further highlighted that Pakistan is grappling with soaring poverty, historic unemployment, and decades-long economic stagnation. Unemployment has reached a 21-year high of 7.1%, and poverty has surged to 44.7%, according to World Bank data.
Structural Decline and Unsustainable Economic Model
The report characterizes Pakistan's economic situation as a structural decline, with growth grinding downward from an average of about 3.9% over 30 years to just 3.4% in the last five years. The economic model, built on consumption spurts, cyclical borrowing, and stopgap stabilization, is no longer capable of supporting the needs of 250 million citizens.
Implications for North East India and India at Large
The economic instability in Pakistan has potential implications for its neighboring countries, including India. The North East region shares borders with Pakistan's provinces of Balochistan and Punjab. Any instability in these regions could impact the security and economic situation in the North East region.
Looking Ahead
The situation in Pakistan serves as a stark reminder of the challenges that arise when economic models are unsustainable and fail to address the needs of the population. It is crucial for policymakers to address the structural defects that perpetuate economic stagnation and to develop sustainable economic models that can support the needs of their citizens.